Modifications in mental health services and agencies are occuring as a result of shifts in national priorities and policy. A prime indicator of these shifts is the change in funding patterns and budgets. Changes in policy also will be evident in the increasingly important role of states. It is our hypothesis that the history of relationships between states and local agencies, especially as indicated by budget, will influence modifications in local agencies and services. Data will be collected from staff in a representative sample of mental health agencies selected randomly throughout the country. Data collection techniques include surveys, phone interviews, and site visits. Three data collection periods are planned--baseline, 12 months, and 24 months--allowing us to trace service and agency modifications over time. Quantitative date (changes in budget, changes in staff, changes in clients), explanatory data (characteristics of the agency, external factors, characteristics of the services), and descriptive data (descriptions of service modifications) will be collected. Two measures of service modifications will be determined. The first is the change in budget for each service from the previous year (before policy and budget changes) to the current year. This change will be determined for each service and a composite score also will be computed for each agency. The second indicator will be descriptions of service modifications collected from interviews with staff. Agency modifications will be determined from data reporting changes in budget, nu mber of staff, and number of clients across the agency. The datga will be analyzed to test the hypotheses that historical relationships between states and local agencies will influence modifications in local services and agencies. The analyses also will identify specific services that continue to be provided at local level and those services that are terminated. Finally, results of the study will describe how local agencies are affected by policy and funding changes. The study will produce timely data describing mental health service and agency modifications. The findings should have implications for practice and planning at the state, local, and national levels.